After investors sat out the nearly nine-year bull market, some investors are finally getting back in.
Discount brokerages TD Ameritrade Holdings Corp., E*Trade Financial Corp. ETFC 0.69% and Charles Schwab Corp. reported surges in client activity at the end of 2017 that have accelerated in January. The firms attributed much of the activity to retail, or individual, investors who are opening brokerage accounts for the first time, some of them lured by the
boom in cryptocurrency and cannabis investments.
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Investors are getting into the psychology and fear of missing out, especially withyounger investors as the stock market keeps hitting new highs.
This rise in interest in some of the riskiest new areas highlights investor optimism that is spurring more trading activity across age demographics and markets. And analysts say the strong trading activity from Ameritrade , results reminiscent of their heady days during the tech-stock boom—suggests people should know the risks.
After retreating from the market in recent years, investors have piled into stocks in recent weeks. They put $33.2 billion into global stock mutual funds and exchange-traded funds in the week through Wednesday, the biggest inflows for any comparable stretch going back to 2002, according to Bank of America Merrill Lynch. Further demonstrating an increasing euphoria, investors have put almost $258 million combined into 10-day-old ETFs that buy companies that have
invested in blockchain, the technology behind cryptocurrencies.
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some of the younger clients who are trading, have huge interest in the highly speculative areas of cryptocurrencies,
including bitcoin, and cannabis.
people want to get in on the bull market action before it ends and is more versed and interested in cryptocurrencies and “pot” investments than older investors.
But the craze hasn’t been limited to millennials. “I’m seeing thousands of percentage points of returns,” said William Starr, 58, an information-technology manager in Roseburg, Ore., of his investments in cryptocurrencies.
Over the past year or so, the three main U.S. stock indexes have surged to record after record. The Dow Jones Industrial Average, for instance, in 2017 alone ran from 20000 to 26000, setting records for speed in hitting 1,000-point increments. Stock gains, however, pale in comparison to gains in cryptocurrencies such as bitcoin, which was up around 1,400% last year.
“Crypto and cannabis…volumes have been up huge,” E*Trade Chief Executive Karl Roessner said Friday on the firm’s fourth-quarter earnings call with analysts and investors. Despite the bitcoin-futures offering not being “a material offering,” Mr. Roessner said about a 10th of daily average revenue trades—a key metric for brokerages—has so far this month been blockchain- or pot-related.
As a sign of the growing interest of younger investors in
crypto and cannabis, the no-commission investment app Robinhood said it would begin letting customers directly buy and sell bitcoin and Ethereum without any added transaction fees starting in February. Coinbase’s fees of 1.5% to 4% in the U.S. Late last year, which investors are growing to hate.
Even bigger funds are dipping into crypto and cannabis as new opportunities that are attracting clients.
The spreading euphoria could mark a
new phase of a long a rally that many investors are just getting in on. Engagement levels are high even excluding those areas, strong interest in speculative cryptocurrency and cannabis markets.
The question for many analysts and investors now becomes whether surging retail trading and interest in nascent, highly speculative markets are signs that the market is overvalued. SENTIMENT TRADER is unsure about whether these are the “earlier days of a new cycle as economic growth picks up, or “the later days of a nine-year bull market.” Time will surely tell.
